National Partnership Agreement on Remote Service Delivery

Customs-Trade Partnership Against Terrorism (C-TPAT)

March 3, 2004

Presented byGeorge R. Tuttle, III

George R. Tuttle Law OfficesThree Embarcadero Center, San Francisco

Phone (415) 986-8780Fax (415) 986-0908www.tuttlelaw.com

George R Tuttle Law Offices 2

What is C-TPAT?A voluntary Customs-Trade Partnership intended to facilitate trade while reducing the risk of introduction of terrorists weapons through legitimate channels of trade


C-TPAT was first introduced by Customs Commissioner Bonner at the November 2001 Trade Symposium

Initial program was develop jointly by Customs and the COAC (Commercial Operations Advisory Committee)

Seven Charter Members invited to join in April 2002

Importers, Carriers, Brokers, Forwarders, Consolidators, and other entities invited to join throughout the summer and fall of 2002

As Of March 1, 2003, Customs is a part of the Department of Homeland Security (United States Customs And Border Protection)

About The Program . . .


1816 “C-TPAT Partners”1138 Importers266 Brokers and Consolidators203 Carriers2 Port Authorities/Terminal Operators

418 “Certified Partners” First round of C-TPAT validations begin in March of ‘03

Recent Numbers . . .


How Does It Work?Number 1 objective Of Customs is to ensure the security of all U.S. Ports of entry and prevent the transit of WMD through them

Customs uses a variety intelligence systems and resources to identify shipments and “containers of concern” and divert them to inspections sites for more intensive electronic and/ or physical examination


How Does Cargo Security Work?

Customs rates all cargo on a point scale

The higher the points awarded the greater the risk

“High risk” cargo is subject to electronic and/ or physical examination

Joining CTPAT lowers your score

Customs also has randomly selected cargo examinations

Intrusive exams

Non-intrusive exams (electronic)


How Does Cargo Security Work?

There are many risk factors considered by Customs, including:importer

Exporter/ Manufacturer

Vague commodity descriptions on shipment paperwork

Exports from countries or destinations of concern (Malaysia, Philippines, Pakistan, Indonesia, etc., i.e., countries with high Muslim populations)

Shipments through known trans-shipment ports such as Hong Kong and Singapore


How Does It Work?

Customs’ 24 hr. Container Manifest ruleGives Customs more information on shipments in sufficient time to decide whether to allow carrier to load.

Specific HTS and cargo descriptions are required on manifests or loading will be denied

Similar rules are in effect for air cargo and express consignment shipments

Notification= wheels up or within 4hrs depending on point of departure

Code Orange conditions can increase the number and frequency of cargo exams (up to 400% in San Francisco)


How Does C-TPAT help?

Importers concerned over security or with potential delays caused by shipment examination can become “trusted” partners with Customs

Shipments by importers with a secure supply chain bypass examination process, allowing Customs better use of its resources to examine other cargo

When bypass is not possible, C-TPAT partners receive examine services before non-CTPAT shippers


Other Benefits of C-TPAT

Additional benefits of C-TPAT membership:

Assignment of Customs Account Manager (if one is not already assigned)

Access to the C-TPAT membership list

Eligibility for account-based processing (bimonthly/monthly payments, e. g.) of duties and fees

An emphasis on self-policing, not Customs verifications

Eligibility for participation in Customs’ Importer Self Assessment (ISA) program

Other specific benefits to be assigned on a case-by-case basis


How To Become A Member of C-TPAT

Sign Memorandum of Understanding (MOU) and submit to Customs

Conduct a self-assessment your supply chain security using the C-TPAT security guidelines jointly developed by Customs and the trade community, covering:

Procedural Security

Physical Security

Personnel Security

Education and Training

Access Controls (IT and facilities)

Manifest Procedures, and Conveyance Security



Respond to Customs’ supply chain security profile questionnaire which requests, in executive format, information on your company’s:

Physical & Procedural Security

Employee and visitor screening

Education and Training

Access Controls

Manifest Procedures, and Conveyance Security

Summarize standards for selection of suppliers related to security, production process, and fiscal soundness

Prepare profiles on all “tier 1” suppliers in LSI’s logistics chain


The C-TPAT Application Process

Customs aims to complete an evaluation of the questionnairewithin 30-60 days after it has been submitted

Comments may include

Request for additional information

Request for clarification of facts or process

Recommendations for security enhancements

Generally, an applicant is approved for program unless significant security lapses appear evident or insufficient information is provided



In mutual cooperation with Customs, develop and implement security program enhancements, as needed, in accordance with C-TPAT guidelines and any recommendations by Customs.

Stated intent of Customs is not to impose any security requirements that will be cost prohibitive

C-TPAT Applicants typically find that they already have many of Customs guidelines already in place

Communicate C-TPAT guidelines to unrelated suppliers in the supply chain and work toward building the guidelines into relationships with these companies


C-TPAT Validation Process

Following acceptance, applicant will be subject to an on-site validation process

The purpose is to ensure that the supply chain security measurescontained in the C-TPAT security profile have been implemented and followed

Evaluate the status and effectiveness of security measures in the participant’s profile and make recommendations where appropriate.

C-TPAT validations are not audits. They will be focused, concise, and are to last not longer than ten work days.

Customs will schedule a company’s first validation within approximately three years of the company becoming a C-TPAT certified participant.


C-TPAT Validation Process

Expects to complete 100 validations by the November 2004 Trade Symposium

Customs’ “supply chain specialists” review CTPAT applications and perform validations

Customs to hire and train 40 new “supply chain specialists” during the remaining part of the fiscal year

Customs to have 100 new “supply chain specialists” for fiscal year 2004


What Needs To Be Done to Join?

Step 1: Conduct C-TPAT self-assessment studyPrepare written overview of Company organization, structure, & facilitiesRequest and review any company internal policies, procedures, orguidelines on:

Physical security of facilitiesEmployee and visitor access controls, security, & screeningAny company training or education on security awarenessManifest/ shipment verification proceduresShipping and receiving verification procedureConveyance Security Procedures


What Needs To Be Done?

C-TPAT self-assessment study, cont., Conduct on-site reviews or interviews to verify if policies and procedures are implemented

If specific policies and procedures are lacking, interview appropriate personnel in affected areas or department to determine presence of undocumented practices



C-TPAT self-assessment study, cont.,Request and review any internal standards for selection of suppliers related to:

Physical security, production process, and fiscal soundness



Step 2: Prepare Profiles on all “tier 1” suppliers (Materials, Goods, & Transit Services)

Name & location of Supplier

Product(s) or services provided

Location of production facilities

Nature of relationship with importer and shipper

Conduct written supply chain security review for major tier 1 providers (Send questionnaire)***

Summary of applicant’s knowledge of supplier’s security procedure (Note: it is not necessary to have completed security review of tier 1 suppliers at time of submission of application)



Step 3Prepare questionnaire response based on information gathered in steps 1-3.

Document all information for later review by Customs during the verification process.


Additional Requirements

Profiles and assessments of new suppliers must be completed and communicated to Customs as soon as possible

Company expected to prepare written internal controls and procedures to maintain and evaluate C-TPAT program.

What does company do to report, evaluate and correct any breaches of security?

What does company do to evaluate security risk associate with a new supplier?



Approaching the taskPhase 1

Security assessmentInternalTier 1 suppliers

Preparation of Questionnaire Response

Phase 2Preparation of manual and internal proceduresOngoing reviews


Why Join?The Bottom Line

Does C-TPAT make sense for you?Evaluate your logistics lines. Are you in a “high risk” lane?

What are your current clearance / release times?

How critical is your release time?

Future is unknown, CTPAT is good insurance against possible disruption of supply chain

Avoids some security screening

Speeds up other security that can not be avoided

Enhances view of company as a good corporate citizen

Creates positive business image & relationship with Customs and Customers


Why Join?The Bottom Line

Allows companies to access other “special” Customs programs:

Import Self-assessment (ISA) Program

Eligibility for Account based Processing (ACH) for Customs payments

An Account Manager to assist you with Customs issues

Access to listings of other CTPAT members

Documents

National Partnership Agreement on Remote Service Delivery